My Mind on Mortgages

A month or so ago I wrote this post on the impact of government borrowing on interest rates.  Basically, as the government borrows more and more money they “crowd out” private sector borrowers or force them to pay higher interest rates.  Last Tuesday NPR’s Planet Money Team did this podcast in which they visit Jamaica [...]

On Saturday the Chinese government announced that they would allow their currency, the yuan, to float in a broader trading range against the US dollar.  This morning the yuan rose to the highest level in the modern era.  How might this impact mortgage rates? For years the Chinese government has subsidized foreign currencies, especially the [...]

I’ve written repeatedly on my ‘rate update’ posts that inflation is the primary driver of long-term mortgage rates.  When inflation expectations rise mortgage rates follow suit and vice-versa.  As I wrote about last September the government’s fiscal stimulus efforts have pumped substantial amounts of money supply onto the Federal Reserve’s balance sheet.  According to Irving [...]

Normally I’m not a huge PIMCO follower.  In case you don’t know PIMCO is the world’s largest bond investment money manager and home to many top name economists and analysts.  The comments made by PIMCO officials often get headlines almost like an official of the Fed. And although I don’t “goon” for PIMCO like many [...]

Last September I wrote this article for my newsletter in which I introduced my readers to the Irving Fisher’s equation of exchange which reads MV=PT where M= money supply, V= velocity of money, P=price level, and T= quantity of goods and services transacted (real Gross Domestic Product [GDP]). The thesis of the article was that [...]

If you are a reader of this blog’s ‘rate update‘ posts then you may be wondering why attention is paid to the US Treasury and their biweekly auctions.  The reason has to do with an economic principle called the “crowding out effect“. According to Wikipedia ‘crowding out’ is “any reduction in private consumption or investment [...]

I’ve covered the topic before on ‘rate update‘ but I thought I would write a small blurb this morning because the WSJ had an interesting article on the topic. As you may be aware the US sells a lot of it’s debt to foreign investors around the world.  When I say “debt” I mean US [...]

The WSJ published results from a survey they did on Thursday and Friday of last week which shows that all 18 of the primary dealers that underwrite US Treasury auctions believe yields will be higher next year.  Here is a chart with the results: The average forecast for the 10-year treasury was 4.125% which is [...]

A “flight-to-quality” trade is not the latest comedic duo out of New Zealand but it is an important concept when it comes to tracking mortgage rates.  I will do my best in this post to explain what it is and how it impacts long-term mortgage rates. “Flight-to-quality” is sometimes also referred to as “flight-to-safety” which [...]

For most people today’s news that Australia has lifted it’s key short-term interest rate for a 3rd-straight month is of no importance.  After all, you probably don’t hold any Australian deposits or aggressively speculate in foreign currencies. However, if you’re shopping for a home or considering a refinance this morning’s headline is more news worthy [...]